The issues raised on these three appeals from Mr Justice Fosket (sitting with Senior Costs Judge Gordon-Saker as assessor) was the reasonableness of changing funding from legal aid to a CFA after liability had been admitted. In each case the success fee and premiums were originally disallowed by the Costs Judges, but this was overturned by Mr Justice Fosket.
The significance of these particular cases was that the Claimant already had legal aid and at the time of switching to a CFA the Defendants were already, in principle, the paying party. The question was whether the resulting success fee and ATE premiums were therefore reasonably incurred.
The Court of Appeal
Lord Justice Lewison emphasised the need to consider the reasons why the receiving party made the choice they did. In all three cases the reasoning was based on the risk of the LSC withdrawing or restraining funding and the shortfall in costs by virtue of failing to beat a Part 36 offer. In all three cases the solicitor did not inform the client that a consequence of switching funding would be that the Claimant would lose the benefit of the 10% Simmons v Castle uplift. He found that in each case the advice to the client had exaggerated (and in two cases misrepresented) the disadvantages of remaining with legal aid funding and had omitted entirely the certain disadvantage of entering into a CFA.
Lord Justice Lewison rejected the criticism of the Costs Judges and commented that the Judge at first appeal did not apply the right test to his appellate role. He was not entitled to interfere with the evaluative judgment of the three Costs Judges. Lord Justice Lewison also criticised the Judge for casting the burden on the paying party to show that the Claimant's decisions would have been different had they been properly advised. By contrast the Costs Judges correctly placed that burden upon the receiving party. Finally Lord Justice Lewison criticised the comparison between damages and the 10% uplift, preferring a comparison between the likely liability for costs as against the uplift.
Accordingly Lord Justice Lewison allowed the appeals, restoring the decisions of Master Rowley, Deputy Master Campbell and (Regional Costs Judge) DJ Besford. Lady Justice King and Lord Justice Longmore agreed.
The fact of the matter is that a client must be enabled to make fully informed decisions, particularly in circumstances where it is not a foregone conclusion that a recommended step is in the client's best interests. In these appeals the omission to inform the client that they were foregoing the 10% uplift was plainly significant and ultimately came at a cost to the solicitor (via the success fee and probably the costs of these appeals) and the ATE insurer. The client also lost out on a 10% uplift. The decision to switch funding only benefited the Defendants who were spared a 10% uplift and liability for the success fee and ATE premium.
This decision was of course fact specific and it does not necessarily follow that switching from legal-aid to CFA in other circumstances would not be perfectly reasonable.